The Worst Things You Can Do If You Inherit

When a person inherits from an estate, they receive a one-time windfall. While it can be beneficial, it comes with certain concerns relating to what you do, once you have received the inheritance. Consider the following:

1. Failing to INVEST THE Cash FOR the Long-term

When you inherit, there is a good chance that you will inherit cash. There is a tendency to take that cash and keep it in the form of cash. However, the objective in most instances should be to get that cash invested to avoid the depreciating value of the relative inflation. When you invest funds in an alternative way, there may be a better opportunity, when leaving it in cash creates an opportunity cost. Lastly, the investment of the funds makes it less likely that you will spend the funds capriciously.

2. Refrain from Purchasing an asset you can't afford or maintain.

One of the biggest mistakes heirs make with large sums of cash is buying an asset they can't maintain for the long term, such as an expensive home or a luxury item that one would not purchase normally. Remember, this is a windfall. The purchase is one thing. However, there are further costs of maintenance and the payments when you take the inheritance and use it as a down payment and then take on additional costs of financing.

3. Holding onto an inherited property you can't afford

Since not all inheritance comes in cash there may be a reason beyond an economic goal that makes one not want to otherwise liquidate it, even though liquidating it may be the right thing to do. An inheritance can be tricky, Often, heirs have an emotional attachment to an asset they can't afford to maintain. Consider the inheritance of the family home, which rests in the history of the heir, yet the home may require updating and maintenance that is risky when holding on to the asset in the future.

Look carefully at the terms and conditions of an inherited asset. That includes existing leases, money owed, contracts pending, and even the time and hassle it may require to maintain the property or asset. Refrain from the risk where dipping into savings and retirement funds to pay off bills. Don't assume you have to hold onto the asset.

4. Failing to Diversify - -Putting all your money in one place

In general, putting all your money in one place, like a single stock or piece of real property, may be a bad idea. Make sure it is diversified even if you are considering real estate.

5. Speak TO YOUR lawyer or find A FINANCIAL advisor

If you've inherited money or an asset of some kind, speaking with a lawyer or a financial advisor may help you optimize your inheritance, so you don't risk losing it all or ending up in a worse financial situation than you were before the inheritance. Gaining advice on matters that you do not really understand is necessary, since the goal should be to help build a diversified portfolio that may include real estate or other big purchases, requiring money is sufficient to hold onto these assets for years to come.